ANCHORAGE -

The Mat-Su Borough has a month to return $12.3 million in federal funding for a fast ferry constructed as part of a troubled transit project, which never saw service due to its planned docking facilities never being completed.

On Thursday afternoon, borough manager John Moosey and Port MacKenzie Director Marc VanDongen told reporters that they expect to receive no more than $6.5 million from any sale of the Susitna, a prototype vessel built as a dual-purpose civilian or military hull in connection with the U.S. Navy. The balance of the federal money will have to be repaid with borough general funds.

According to a statement from borough spokesperson Patty Sullivan, borough officials have been asked to repay the sum by the Federal Transit Administration in connection with the Susitna.

Although the ferry was christened in 2010 by Sen. Lisa Murkowski as a commuter link to Anchorage, delays in the project left the borough paying $66,000 a month to store it two years later, with the borough Assembly approving a plan to dry-dock the vessel at Port MacKenzie in August 2013.

In the FTA's Tuesday letter (PDF), acting administrator Therese McMillan says the funds are due despite the borough’s work to resolve the problem thus far.

“Unfortunately, (the borough’s) many efforts to dispose of the asset, or to find a public use for the ferry, have been unsuccessful,” McMillan wrote. “I regret that (the borough) has been unable to find a public agency with a need for the vessel, nor able to put the funded asset into use for public transit.”

An attachment to the letter lists the sum as the expended portion of about $21.2 million in grants provided to the borough for the overall ferry project. While the letter notes the construction of a $3.6 million terminal included in the grant as well as the Susitna itself, it points to the lack of vehicle loading capability at Port MacKenzie and the lack of a matching terminal in Anchorage.

“(The borough) decided to terminate the project and not operate ferry service rather than spend more money to complete the necessary improvements,” federal officials wrote. “Accordingly, the ferry vessel and passenger terminal building never have been used for transit purposes.”

Moosey and VanDongen say the plan to build landings for the Susitna fell apart when later estimates showed that they would cost an additional $40 million the borough didn't have. The 2009 loss of Sen. Ted Stevens' political pull after the later-overturned corruption conviction that tipped the scales of his electoral defeat, combined with an economic slump at the time, meant there was no chance of securing further federal funds.

The borough says it has been trying to sell the Susitna or forgive the grant by transferring the ship for free to another government entity since last year. Those efforts have amassed a number of queries from groups as disparate as Los Angeles County firefighters and the Naval Undersea Warfare Center but little actual interest, with any bids thus far falling through. In March 2013, a request for bids on the ferry produced a single $751,000 offer from Dutch firm Workship Contractors.

Sullivan’s statement lists more recent efforts to sell the ship, with both the Philippine Navy and a Washington-based oilfield service company planning to inspect the ship Aug. 27 and 28.

“Every week I get inquiries, just like this one today,” VanDongen said in the statement. “But there’s no guarantee they’ll buy it.”

Moosey says a special Assembly meeting has been set for 6 p.m. Tuesday to discuss the demand for repayment. He says the move doesn’t come as a surprise, based on previous meetings with federal officials.

“I expected this to be done much easier but this is a challenge,” Moosey said in the statement. “We’ve been diligently looking for solutions to this issue for the last 2.5 years. If we had ferry landings, I’m confident we would not be here today.”

If the debt isn’t paid within 90 days of becoming due, the FTA says it will assess a late fee of 6 percent per year on any delinquent amount.

Channel 2's Adam Pinsker contributed information to this story.

This is a developing story. Please check KTUU.com and the Channel 2 newscasts for updates.